Pioneer plans sales to focus on Permian

Pioneer Natural Resources has set out plans to sell off a slew of assets, leaving it to focus on the Permian Basin. Assets to be sold include those in South Texas, Raton and the West Panhandle. Data rooms will be opened in the first quarter of this year. “After these divestitures are completed, Pioneer’s operations will be solely in the Permian Basin,” the company’s president and CEO, Timothy Dove, said.

Announcing the planned sale, on February 6, Pioneer said the largest parcel to be sold was a 70,000-net acre (283-square km) tract in the Eagle Ford. This makes up the company’s entire 46% holdings in the Eagle Ford, with net output of around 27,000 boepd in the last quarter.

The Raton assets produced 86 mmcf (2.44 mcm) per day and associated infrastructure. The West Panhandle package, meanwhile, provided 7,000 boepd in the fourth quarter, representing Pioneer’s entire 100% interest.

Once these sales have been completed, the company continued, revenue per boe is expected to increase, while expense per boe will fall. As a result, cash operating margins and corporate returns should improve.

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Spending this year will reach US$2.9 billion, including US$2.65 billion for drilling and completion. While costs are broadly anticipated to rise, Pioneer said efficiency gains should offset this predicted 5% increase. The wider industry, it said, is facing cost inflation of 10-15%.

Capital expenditure should be covered by forecasted cash flows, of US$2.8 billion, plus asset sales and cash on hand. The company said its capex plans should achieve cash flow breakeven at US$58 per barrel. Based on current pricing, of US$61 per barrel, cash flow should reach US$3 billion. Furthermore, it has hedged more than 80% of its Permian oil production and more than 60% of gas output in the region.

Pioneer plans to run 20 horizontal rigs in the Permian during 2018, of which 16 will be working in the northern part. Over this period, 250-275 wells will be put into production in the basin, with oil production – and oil equivalent – expected to expand by 19-24% during 2017. Over the year, Pioneer added 314 million boe at a cost of US$8.46 per boe.

Production in the fourth quarter was 305,000 boepd, up 11% on the previous period. Overall output for 2017 reached 272,000 boepd, up 16%.

Net income in the fourth quarter reached US$665 million, with adjusted income of US$209 million. In line with a number of companies, Pioneer seemed bullish about domestic prospects following US President Donald Trump’s Tax Cuts and Jobs Act, which provided a non-cash benefit of US$625 million to the company in reduced tax liabilities.